A Simple Calculation!

We all know about the growth story of Infosys. How about the stock? Lets find out. Infosys was founded by Narayana Murthy along with some others in 1981. It came with an IPO in 1993 at the price of Rs. 95. Everybody who applied got the shares. Many missed the Diamond oppurtunity by not applying. Suppose that a person applied for 100 Shares. It would cost him Rs. 9500. Let us assume that he is holding the same position till today. What will be the value now? Let us calculate.

Remember that in these 13 years Infosys would have offered many dividends. Let us keep this aside and calculate the value of shares alone. Soon after IPO, Infy gave 1:1 bonus in 1994. So, our 100 shares will be 200 in 1994. Again they gave 1:1 bonus in 1996. That will take the count to 400 shares. And again in 1998 they offered bonus of 1:3 shares. That will take our count to 1600 shares. In 2000, they split the stocks (Rs. 10 FC to Rs. 5 FC). This will take our count to 3200 shares. In 2004, again they announced 1:1 bonus. It will take our count to 6400 shares. Recently, two months back they gave bonus shares in the ratio of 1:1. Now, the count of ours would be 12800.

Today(13/10/2006), I checked the CMP of Infosys. Its Rs. 2070. So, what will be the value of our shares? 12800 x 2070 = Rs. 2,64,96,000. Yes, its Two Crores Sixty Four Lakh and Ninety Six Thousand only.

What other investment would have taken to this level? Real-Estate? Bank Deposit? Gold? I don't think so. A Bank deposit of Rs. 9500 in the same year at the rate of 12% would have hardly fetched us Rs. 38,000 by this time